AB 48 and the Deafening Silence

First, what is AB 48 (a.k.a. California Assembly Bill 48)? It’s a California legislative measure to remove an exemption for flight schools that will require them conform to certain financial and organizational standards as otherwise is required for postsecondary educational institutions. It requires fees to be paid into a fund to protect students, among other actions.

So why on earth should I care about AB 48 ? I live, work, and teach predominately in Arizona, after all…

Reason #1: In my “day profession”, I’m a stone’s throw away from needing to work (and, by implication, live) in the state of California. Simply put, that’s often where the best opportunities for us techies often are, especially after 2001 dot-com crash. As much as I love to fly, I’ve also found that I love to teach. And if I want to keep teaching, then this regulation may well impact me if it ever comes to pass that I need to live and work there.

Reason #2: We aviators are dependent on a set of “letter groups” to speak for our interests in Washington, as well as in state legislatures and city halls all across the country. If said groups don’t do their job, we don’t have a voice. It’s up to us to make sure they’re on-task.

Reason #3: This type of thinking by one state government, left unquestioned, could spread to other states.

Apparently, AB 48 has been around since fall 2009. I didn’t know anything about it until I crossed paths with Scott Spangler on his blog post regarding the issue a few weeks ago. I would not have known otherwise, and it certainly got my attention.

So, why is California taking this action? Ostensibly, the focus is to try to protect students that pay for education up front.

To that point, flight schools can often be financially dodgy organizations. It’s not an easy or simple business. Costs are extremely high and often unpredictable, and there is strong competition for students. Since the costs to the student are high, prospective students are often forced to comparison shop for an education based on price, yet they have little view into (or comprehension of) the financial viability of any one organization when they’re shopping. Simply put, they can’t always tell what the financial risks are at face value, yet the schools are often selling them on a dream, so rational thinking doesn’t always ensue.

This has had consequences in the past, more than once, especially when it comes to schools that require full payment up front for a professional pilot training program. Sometimes such organizations end up operating as virtual pyramid schemes.

One such case that literally hit home was Silver State Helicopters a couple of years ago. It certainly appeared like an OK organization from the outside, what with nice shiny offices, new aircraft, lots of locations, heavy recruiting, and glamorous advertising, all the apparent hallmarks of a “quality” operator to the uninitiated. To lock in the cost for the program, students paid for the package up front, often using a student loan. But in practice, Silver State had incoming students funding the training for existing students. When the incoming student money flow took a downward bump, they quickly ran out of operating revenue and quickly went bankrupt. Consequentially, their entry and intermediate level students were stuck with monstrous loans (which are not dischargable in bankruptcy, in case you didn’t know) and incomplete or nonexistent training. A dead dream with a great big bill, in short. (And yes, a friend of the family got caught up in this mess before I could say or do anything to help, and I’m very pissed off about it).

So by taking this legislative action, the state of California is going to fix situations like this and help out the little guy, right?

Not so fast, folks.

Remember that the state of California has a budget crisis of major proportion that’s not going away anytime soon. Any sofa cushion that they can find revenue from, they’re going to look under it. Therefore, it’s not a big stretch to say that the fund that’s there to “protect” the students is also there to support the state’s balance sheet, just like FAA operating funding ends up masking the federal deficit. Under this viewpoint, the bill could be considered just another small business tax passed under the deceptive guise of consumer protection. It’s not overtly stated as a tax, but it might as well be one.

Now, I don’t fully understand the ramifications of this bill yet. There seems to be confusion as to who it applies to. Does it apply to part 61 schools as well as the “formal” part 141 schools? There’s some claim that it applies to independent instructors as well. Does it only apply to schools that are running a “professional pilot program”, or simply anyone that provides preparation for a commercial certificate? I just don’t know yet.

What I do know, and I’m a little upset about, is that I’ve heard virtually zero on the topic from 2 of  3 associations that I think have a vested interest in the outcome. That’s a serious problem, and I really don’t understand the silence.

SAFE posted this press release a day before hearings were held in Sacramento on Monday, June 7. They admittedly heard of the issue at the last minute (understand that SAFE is a young organization just getting on it’s feet and formed because the existing instructor-representing organization wasn’t acting in its member’s interest), but they apparently made a showing to add balance to the discussion.  Good work, guys! I’m glad you’re working on it, and let me know if I can help in any way.

AOPA posted an associated article on May 19. Apparently, they knew this was happening, but I simply didn’t hear anything more on the topic, and I find this silence really strange. I don’t know if they were present in Sacramento on the 7th to help state a counterpoint. I hope they were. After all, AOPA is justifiably concerned that a dearth of new pilots will ultimately choke the lifeblood out of the aviation ecosystem over time. Since AB 48 may mean that learning to fly in California is about to become vastly harder to do, I’d expect them to be all over it. But I just don’t see evidence of this.

(In fact, it recently seems like I get junk mail once or twice a week compliments of AOPA advertising some product or service only incidentally associated with the association’s mission. This seems to have happened concurrently with a leadership change. Guys, I really don’t appreciate being monetized like that, especially when important political issues appear to go unaddressed…).

NAFI seems to be completely absent from this discussion. They should have been all over it. Unfortunate, but I’m not surprised, since it’s hard to tell who they actually serve at this point.

I’d really love to know what happened in Sacramento on Monday. If any readers were actually there, please comment.

Do I have an opinion on this? Opinions are like…oh, you know, everyone has one…

While this looks to be well intentioned legislation on the surface, it has significant costs for a lot of small businesses. Some of those small businesses will simply decide to stop providing flight training. Perhaps some weak ones should, but I’d be willing to bet that there’s some very good ones out there that shouldn’t quit, yet will be forced to anyway. It’s effectively assumed that very few independent instructors will consider the cost and hassle of compliance worthwhile.

Therefore, it would seem to me like the sensible determining factor for protection under such a bill would be this: If your training business requires advance cash investment on the part of the student, then a higher standard applies, and your organization really does need to be subject to financial and organizational scrutiny. However, if your operation is working on a pay-as-you-go basis (as most small schools and independents do), then such oversight is unwarranted. If you’re not paying up front, no “protection” is needed.

But, hey, that’s just me…

Update: After I wrote this, I noticed Scott has another post on the topic. His last paragraph here is dead-on; we can’t depend on associations and journalists to figure this out for us, we need to be involved ourselves. Clearly so. I may disagree with Scott on minor points, but I can certainly back him up on this one.


2 Responses to “AB 48 and the Deafening Silence”

  1. 1 Nick Pipitone June 17, 2010 at 5:54 pm

    AB 48 is simply another attempt by the Sate of California to make general aviation in California go away. We all know that the inept legislators i Sacramento can’t see beyond the tip of their pathetic noses. The take a knee Jerk Reacton with out looking at the long term effects

    1. A reduced pilot pool.
    2. No Pilots, no one to hire, the airlines shrink to nothing until they are forced out of business.
    3. Fewer airlines means fewer routes.
    4. Hotels and restaurants suffer. Fuel supplies dwindle due less demand.
    5.Burdensom costs to instructors, fewer instructors to none and now we loop back to item 1.

    Wake UP Sacramento !!

  2. 2 Ed Rosiak - President California Pilots Association July 13, 2010 at 1:34 pm

    After reading your blog I suggest that you go to our web site and read up on AB48 and the resulting bill(s) that they are trying to put in place as a temporary fix on this. You will better understand what is really going on.

    AB48 is an existing bill that provides funding for a California bureaucracy which overlooks secondary education – i.e, Trade Schools. Flight schools were added after a helicopter school in the Sacramento area closed it’s doors and ran off with 15-30 students entire tuition. This was a self serving reaction by a few CA legislators, who have since learned that they screwed up (i.e., they were very surprised how GA fought back).

    I will agree that all aviators need to get off their back sides and get involved to protect general aviation, their airports, and rights as pilots.

    The days of writing a check to AOPA, or other national orgs and expecting GA to be completely protected are long gone. There are too many problems and they simply can’t do it all.

    CALPILOTS has been stating for five years that every aviator and pro-aviation person, should belong to their local, statewide and national aviation orgs. PLUS, they all need to do something no matter how small.

    The “I’m too busy to have to worry about GA attitude” is prevalent, but let me tell you this, if you don’t get involved, you will continue to see your airports close and rights (TSA, FAA, etc) more threatened.

    It’s up to you.

    Ed Rosiak

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